ISTANBUL, July 17 (Reuters) – Turkish equities and the lira gained on Thursday in tandem with global stock markets and after a top court rapporteur call for the ruling party not be closed, raising expectations that political tensions may ease.
Turkey’s main stock exchange index .XU100 gained 2.26 percent by 0730 GMT while the lira IYIX= was up around 1 percent to 1.2030 against the dollar on the interbank market versus the previous day’s 1.2150.
Financial markets have been hit by political tensions between Turkey’s secularist elite, including army generals and judges, and the ruling AK Party, which is fighting in court against charges of anti-secular activities.
“I think this rise (in assets) is mainly because of the rapporteur’s report,” said Ali Riza Incekara, head of research at Raymond James Securities in Istanbul.
“So far, the market has always priced in that the AK Party would be closed. Now it’s pricing the other way around. But we can’t tell yet whether the overall market expectation shifted to a non-closure,” he said.
Constitutional Court rapporteur Osman Can recommended on Wednesday that the AK Party not be closed nor receive any financial penalties. His report is not binding and in recent key rulings the court has not followed Can’s recommendations.
“There’s a growing perception in the market that a decision not to close the party could come, but still we don’t know for sure. It’s still 50-50 and the report is not binding, we still recommend any rises should be used as selling opportunuity,” said Alper Erginol at Oyak Invest.
Political analysts were more sceptical, saying the report had no bearing on the case and pointed to the court ignoring Can’s recommendation in March not to take up the case against the AK Party.
A ruling is expected in early August. If the court rules against the party, an early parliamentary election is likely.
In addition, U.S. bank shares posting the biggest surge in 16 years, prompting Asian stocks to rally and a fall in oil prices have also lifted Turkish equities.
“A fall in oil prices boosted world equities. The market has breached the resistance at 1.2070 after that,” a forex trader said of the lira.
Also on Thursday, the market are watching the Turkish central bank’s monthly interest rate decision.
Bankers and analysts expect the bank to raise the key interest rates by 50 basis points, tightening monetary policy in a bid to curb inflation.
“The market has already priced in a 50 basis points rise,” Incekara said.
The yield on the new benchmark April 14, 2010 bond <0#TRTSYSUM=IS> eased to 21.70 percent from Wednesday’s 21.70. (Additional reporting by Nevzat Davranoglu, editing by Paul de Bendern)